It was a terrible Tuesday for the markets.
The Dow plummeted 332.7 points, its worst drop of the year. It erased all gains for the year. The S&P 500 and Nasdaq both dropped about 1.7% Tuesday.
The momentum sure isn't going in the direction investors prefer. Although the S&P 500 is down just over 3% from its all-time high last week, Tuesday marks the second big slide in three days.
What's caused all the commotion in the markets? Blame China, the strong dollar, oil and Basel's latest banking rule idea.
The U.S. dollar is now trading at a 12-year high against the euro. That's great for any Americans booking trips to Europe, but it's not so great for big multinational companies trying to sell their goods abroad -- or bring their foreign profits back to the U.S.
"Today was a culmination of events between the strong dollar, potential Fed tightening and uncertainty in Europe coming together to cause this worst day of the year," says David O'Malley, chief executive officer at Penn Mutual Asset Management.
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Look at Intel (INTC), one of Tuesday's worst performers. It does the majority of its business abroad, meaning it's vulnerable to currency problems. The high dollar makes it harder for American companies to compete against their European counterparts, who can offer products at a lower cost. Intel finished Tuesday down more than 3%.
Oil also continues to rattle investors. Energy stocks were the second worst as the price of crude oil slipped 2.6% to $48.60. A Goldman Sachs report published this week reiterated that $40 a barrel is still a possibility.
Bank trouble: On top of that, bank stocks tumbled. Citigroup (C), MetLife (MET) and Prudential Financial (PFK) were among the fastest falling stocks Tuesday. Banks are going through rounds of stress tests with the Fed this week, and a report from a Japanese media outlet indicated that Basel is thinking about implementing a rule to require major international banks to hold even more capital on hand.
Citigroup failed one stress test last year, and there's uncertainty about how many banks will pass this year. Bank stocks were down the most of any stock sector Tuesday.
All categories, even the very defensive utility sector, fell Tuesday.
"The market is showing an undercurrent of black death for any number of reasons -- it doesn't like the strong dollar nor the stronger labor market," says Brian Sozzi, chief equity analyst at Belus Capital Advisors.
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Then there's China. It's breakneck growth is slowing, and the latest economic news from China only added to the belief that the decelerating is ongoing. China's inflation index went up while the producer's price index showed manufacturers are struggling to make profits.
Volatility is back: Tuesday looked much like the end of last week.
Markets took a nosedive Friday after a strong U.S. jobs report stirred rumors that the Federal Reserve would raise its key interest rate perhaps by June -- a concerning event for stock investors. Low interest rates are helping to drive the 6-year old bull market. Any bump up in interest rates could end the run.
Tim Anderson, managing director of MND Partners, notes that there will be "no comfort" about the Fed until next Wednesday when the formal Fed policy decision and statement comes out.
CNNMoney's Fear & Greed Index is shifting toward fear. A week ago it was at 71, but now it's dropped back to 48.
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Many experts believe stocks are too expensive and the markets are due for a correction (that's when the market falls by 10% or more). That hasn't happened since 2011. One popular measure, the Shiller P/E, shows stock values are at levels last seen right before the 2008 financial crisis. That's high, although not as high as the run up to the dot-com bubble.
"This movement probably has a little bit of follow through to go as the market comes to terms with a lot of these factors," says O'Malley.
